EXCLUSIVE: Deputy FinMin scored Prasa tenders as agency chair

2017-06-05 06:41
Sfiso Buthelezi (File)

Sfiso Buthelezi (File)

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Johannesburg - Deputy Finance Minister Sfiso Buthelezi and his brother are beneficiaries of companies that secured contracts worth at least R150 million from the Passenger Rail Agency of South Africa (Prasa) and some of its suppliers while Buthelezi was board chairperson of the troubled state-owned rail operator.

News24 can reveal that Swifambo Rail Leasing, the supplier of Prasa’s controversial Afro 4000 locomotives, appointed Inala Shipping – a company 100% owned by Nkanyiso Buthelezi, the deputy minister’s brother – to manage the shipping and logistics for the importing of the trains.

Inala then appointed Sebenza Forwarding and Shipping, a company in which the deputy minister himself is an ultimate beneficiary, to handle the customs clearing portion of the importing of the Spanish-built locomotives in 2014 and 2015.

Buthelezi was appointed deputy finance minister on March 31 as part of President Jacob Zuma’s "night of the long knives" Cabinet reshuffle that saw Pravin Gordhan and Mcebisi Jonas booted from the finance portfolio.

He is a former adviser to Zuma during his time as MEC for economic development in KwaZulu-Natal.

Sebenza confirmed to News24 that Swifambo had paid it about R100 million. The company explained that of this amount, only about R3.4 million was for its service fee, with the rest of the money having been used to pay the VAT, customs duty fees and shipping line charges on behalf of Swifambo for importing the locomotives.

Inala pocketed about R1. 5 million in “profit share” from the deal, explained Sebenza.

The lobbying

Emails obtained by News24 show that Nkanyiso Buthelezi started lobbying Prasa for work less than three months after the Prasa board, led by his brother, awarded Swifambo a contract worth R3.5 billion to supply the rail operator with 70 new locomotives.

For a separate tender, Sebenza directly invoiced Prasa to the tune of nearly R42 million in 2013 for services related to the importing of steel rail tracks from European manufacturer Tata Steel France, a contract that has come under scrutiny from the Auditor General (AG).

Vossloh Kiepe, a sister company of Vossloh Espana, the manufacturer of the Afro 4000 locomotives supplied to Prasa through Swifambo, also paid Sebenza nearly R13 million in 2011 for services related to the importing of heating, ventilation and air conditioning (HVAC) systems that Prasa had ordered from Vossloh Kiepe.

These contracts and deals were all concluded before Buthelezi formally resigned as Prasa board chairperson in December 2014, the same month during which the first of Prasa’s Afro 4000 locomotives arrived at the Cape Town docks.

But Buthelezi, his brother and Sebenza all deny that Sebenza and Inala benefitting from Prasa contracts whilst Buthelezi led the Prasa board amounted to a conflict of interest.

At the time during which Vossloh Kiepe appointed Sebenza for the HVAC project, Sfiso Buthelezi was a director of the latter company.

Though he resigned from Sebenza in 2012, he remained a director and shareholder of several entities that directly and indirectly held shares in Sebenza while the deals with Tata Steel France and Swifambo were concluded.

Onion-like shareholding structure

Inala Shipping, which according to Nkanyiso Buthelezi received about R1. 5 million in profit from its involvement in importing the Afro 4000 locomotives to South Africa, is 100% owned by the deputy minister’s brother.

Sfiso Buthelezi’s stake in Sebenza, however, is more complex.

According to answers provided to News24 by the deputy minister, Buthelezi is one of 15 beneficiaries of the Mboneni Trust, which in turn owns a 14.5% stake in Autshumatu Investments. The latter company has a 18.5% stake in Makana Investment Corporation (MIC), a company managed by a selection of former political prisoners and a 55% shareholder in Sebenza. The remainder of Sebenza’s shares are owned by JSE-listed logistics giant Bidvest.

Buthelezi says he is also one of nine shareholders in a company called Sihayo Investments, which holds 22.5% of Autshumatu’s shares. According to company records, Buthelezi is an active director of Autshumatu Investments.

The deputy minister resigned as a director of MIC in August 2016, almost two years after the first Afro 4000 locomotives arrived in South Africa, and well after Rapport newspaper’s 2015 revelations around the unsuitability of the trains for South Africa’s rail network.

This means that Buthelezi was both a director and a shareholder in companies that had a direct stake in the three Prasa-linked contracts, while he maintained his position as Prasa chairman.

AG's scrutiny

Documents seen by News24 indicate that the Auditor General noted Buthelezi’s relationship to Sebenza in the AG’s detailed audit findings on Prasa for the 2013-14 financial year.

The AG also recommended that nearly R18 million paid to Sebenza by Prasa be classified as irregular expenditure, seeing as the state-owned company appointed Sebenza by means of a confinement instead of through an open and competitive bidding process. The AG’s findings were centred around Prasa’s appointment of Sebenza for the importing of the rail tracks procured from Tata Steel France.

The AG’s office did not want to comment on the specifics of its findings regarding Prasa and Sebenza.

“The auditor-general of South Africa’s final report on Prasa for 2013-14 was incorporated into Prasa’s annual report that was tabled in Parliament. As this is a public document after tabling, please ask Prasa for a copy,” the AG’s office told News24.

In October 2013, less than three months after the Sfiso Buthelezi-led Prasa board awarded the R3.5 billion locomotives contract to Swifambo, Nkanyiso Buthelezi wrote an e-mail to Saki Zamxaka, head of Prasa’s technical division, in which Buthelezi lobbied Zamxaka for work.

“It was indeed great meeting you on Wednesday evening and I bet the discussions were just as enjoyable, to be continued,” Nkanyiso Buthelezi wrote to the Prasa executive.

“We have the capacity to take care of your shipping requirements, especially the imports of the components. . . So if you think there are areas where we can collaborate we would most definitely welcome a chance to discuss such opportunities,” added Buthelezi. He included a copy of Inala Shipping’s “brief company profile in his email.

Two days later, Zamxaka responded to the then Prasa chairperson’s brother.

“Thank you for your email. It was indeed a pleasure to meet and discuss. I will look at the document and come back to you about how this requests (sic) can be processed,” Zamxaka wrote to Buthelezi.

It does not appear that Buthelezi’s lobbying helped his company secure any direct contracts from Prasa itself, but Inala Shipping did manage to benefit from a Prasa contract by means of its appointment by Swifambo to help import the Afro 4000 trains.


(File, Netwerk24)

'No conflict of interest'

Sfiso and Nkanyiso Buthelezi, along with Sebenza, all deny that the contracts Sebenza and Inala secured from Prasa and its contractors amounted to a conflict of interest, despite the deputy minster’s then role as Prasa chairperson.

“I was never in a meeting that decided to award any work to Sebenza by Prasa. I never influenced any decision to award work to Sebenza [and] I received no personal gratification from any of the entities you have mentioned in your questions (Sebenza, Swifambo and Inala),” said Buthelezi.

The deputy minister added that he “played no role in the business relationships or transactions between Prasa, Swifambo, Sebenza or Inala.”

“To my knowledge there was never an instance where Mr Sfiso Buthelezi was involved in the adjudication of the Inala Shipping/Swifambo contract and indeed Swifambo is a stand-alone company with its own governance structures. It is also worth mentioning that we started courting Swifambo after the announcement of the winning bidder,” says Nkanyiso Buthelezi.

Xolani Sithole, Sebenza’s managing director, says his company’s work with Prasa was not irregular seeing as Buthelezi, before his resignation from the company, was a non-executive director of Sebenza who did “not get involved in the day-to-day operations” of the company.

“In our meetings while Mr Buthelezi was [a] non-executive [director], he declared his relationship at Prasa,” said Sithole.

- Do you have information for our investigative journalists? Send an e-mail to tips@24.com

Read more on:    prasa  |  sfiso buthelezi  |  tenders  |  government spending

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